Compound Interest Calculation for 40000rs at 5% per annum for 3 years

Step 1: Understanding the Formula

To calculate compound interest, we use the formula:
A = P(1 + r/n)^(nt) - P

Where:
A = the final amount (including the principal and interest)
P = the principal amount (initial investment)
r = annual interest rate (in decimal form)
n = number of times interest is compounded per year
t = number of years

Step 2: Identifying the Given Values

In this case, we have been given:
Principal amount (P) = 40000rs
Annual interest rate (r) = 5%
Number of years (t) = 3

Step 3: Converting Percentage to Decimal

Since the annual interest rate is given in percentage form, we need to convert it to decimal form by dividing it by 100:
r = 5/100 = 0.05

Step 4: Calculating Compound Interest

Now, let's calculate the compound interest using the formula mentioned above:
A = 40000(1 + 0.05/1)^(1*3) - 40000

Simplifying the equation:
A = 40000(1.05)^3 - 40000
A = 40000(1.157625) - 40000
A = 46305 - 40000
A = 6305rs

Therefore, the compound interest for an investment of 40000rs at an annual interest rate of 5% for 3 years is 6305rs.

Step 5: Calculating the Amount

To find the final amount, we need to add the compound interest to the principal amount:
Amount = Principal + Compound Interest
Amount = 40000 + 6305
Amount = 46305rs

Therefore, the final amount after 3 years would be 46305rs.

Conclusion

In conclusion, for an initial investment of 40000rs at an annual interest rate of 5% compounded annually for 3 years, the compound interest would be 6305rs and the final amount would be 46305rs.